As the Stock Market Runs Out Of Steam, Is Bitcoin At Risk Of Seeing Major Downside?

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No one likes to think that Bitcoin and the crypto market are related to the global stock market but reality seems to be different. When the pandemic was in full force around March, the entire global stock market plummeted and Bitcoin wasn’t different. The correlation between the global stock market and Bitcoin was apparent.

Since then, things have cooled off significantly and the correlation was a bit tottering. Bitcoin managed to fully recover and even hit $10,000 again while the S&P 500 didn’t. Unfortunately, now when new fears about a second wave pandemic are resurfacing, Bitcoin correlation to the stock market is coming back. 

In the last week alone, Bitcoin has practically mimicked the action of the S&P 500 with some delay. There was a significant bounce on June 15 thanks to the Federal Reserve coming up with more stimulus to help the economy. The Fed buying individual corporate bonds shouldn’t really affect Bitcoin at all, in fact, the COVID-19 or any crisis for that matter shouldn’t have anything to do with cryptocurrencies.

It’s tough to suggest Bitcoin as a safe haven when its price drops 50% in 24 hours. It’s true that it recovered but what if you need your repositories in the short-term?

Will Bitcoin Continue To Be Affected By Other Markets?

Bitcoin was intended to become a global currency but the amount of volatility and low liquidity is making that task almost impossible. It’s no surprise that Bitcoin is correlated with the stock market and other markets. Many investors are holding Bitcoin for the short-term to make quick gains, many are using it as a speculative asset and when there is global economic uncertainty, people want to cash out as quickly as possible. 

Until Bitcoin is run by market-makers and has a lot more liquidity, short-term explosive moves will continue to happen. Are fundamental metrics great for Bitcoin right now? Yes, but that doesn’t stop a single whale from dumping his Bitcoins and crashing the entire market. The forex market has around $5.1 trillion in volume per day, an enormous number compared to $70 billion per day of the entire crypto market.